Crude Oil Tanker Surplus Expands in Persian Gulf to Curb Rates

A glut of oil tankers competing to
haul 2 million barrel cargoes of crude from ports in the Persian
Gulf expanded, hindering ship owners’ ability to achieve better
freight rates.

There are 22 percent more very large crude carriers, or
VLCCs, seeking charters over the next 30 days than probable
cargoes from the world’s largest loading region, according to
the median in a Bloomberg survey of seven shipbrokers and owners
today. The excess last week was 17 percent.

Earnings for the vessels globally climbed 16 percent to
$14,709 a day last week, their third consecutive advance,
according to Clarkson Plc (CKN), the world’s largest shipbroker.
That’s still less than the $24,200 that Frontline Ltd., the
tanker operator led by billionaire John Fredriksen, needs for
the ships to break even.

“It’s going to take a while for the VLCC market to return
to balance, at least a year but probably longer,” Jonathan Chappell, an analyst at Evercore Partners in New York, said by
e-mail today. “There is still four years of overcapacity that
needs to be absorbed before fleet utilization can return to
levels where rates are meaningfully profitable for a sustainable
period.”

Rates measured by industry standard Worldscale system fell
2 percent yesterday to 35.92 points, according to data from the
Baltic Exchange in London. That means the ships are earning
35.92 percent of a dollars-per-ton flat rate, set once a year by
the Worldscale Association in London and New York.